Pennsylvania Labor and Employment Blog : Pennsylvania Labor and Employment Lawyer & Attorney : McNees Wallace & Nurick Law Firm : Human Resources, Workplace and Business Law : Harrisburg, Lancaster, Allentown, Lehigh

This post was contributed by Rick L. Etter, Esq., an Associate in McNees Wallace & Nurick LLC's Labor and Employment Group.

Given the increase in major weather events that have impacted Pennsylvania recently, including high winds and substantial flooding, employers should consider the following issues that may arise when closings, delays, and absences are caused by inclement weather.

Must employees be paid when the business is closed because of inclement weather?

Nonexempt employees need not be paid for time when they do not work because the business is closed. Exempt employees must be paid their salary for the week regardless of the business closing. An employer may require exempt employees to use accrued paid time off.

Must employees be paid if they don’t report to work due to inclement weather when the business is open?

Nonexempt employees need not be paid for the time they are absent from work. Exempt employees need not be paid for a whole day absence taken due to inclement weather. An exempt employee absent for part of a day may be required to use accrued paid time off. However, if the exempt employee has no accrued paid time off, his or her salary may not be docked for a partial day absence.

May an employee be disciplined or discharged for failing to report to work due to weather conditions when the business is open?

An employer may generally apply its normal attendance policy to weather related absences. However, there is one major exception. Under Pennsylvania law, an employer may not discipline or discharge an employee who fails to report to work due to the closure of the roads in the county of the employer's place of business or the county of the employee's residency, if the road closure is the result of a state of emergency. The law does not apply to the following jobs: drivers of emergency vehicles, essential corrections personnel, police, emergency service personnel, hospital and nursing home staffs, pharmacists, essential health care professionals, public utility personnel, employees of radio or television stations engaged in the gathering and dissemination of news, road crews and oil and milk delivery personnel.

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Recently, Michael L. Hund, Esq. and Salvatore J. Bauccio, Esq. from McNees Wallace & Nurick LLC's Business Counseling Group developed a White Paper entitled: Equity Incentive Plans: Compensating Key Employees with Equity, Options and Equity Appreciation Awards (PDF). The White Paper provides an excellent summary of different methods that organizations can use to compensate and reward key employees. To view the White Paper click here.

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This post was contributed by Brett E. Younkin, Esq., an Associate and a member of McNees Wallace & Nurick LLC's Labor and Employment Practice Group in Columbus, Ohio.

The receipt of a federal lawsuit is generally viewed as a bad day for any employer; seeing that a plaintiff is seeking class action status on behalf of hundreds or thousands of current and past employees is enough to turn a bad day into an unenviable nightmare. Such was the situation when Wal-Mart, one of the country’s largest employers, was notified that a female manager, Betty Dukes, was suing the company on behalf of all female managers alleging a pattern and practice of discriminatory pay and promotion practices. Ms. Dukes alleged that despite the company’s non-discrimination policy, the Arkansas-based employer paid their female managers at lower rates than their male counterparts on a nationwide scale and women were promoted less often than men.

Recently, the issue of certifying the class of female employees became the focal point of what many view to have been one of the liveliest oral arguments before the United States Supreme Court in years. During each side’s hour-long presentation, it seems that the Justices spoke almost as much as the attorneys, often-times overlapping each other’s questions and even interrupting a colleague’s question in an attempt to make their own point. However, the result of the heated debate is far from clear. Will Wal-Mart be faced with a multi-million dollar class action for discriminatory practices or will it be just another single-litigant against one of the world’s largest retail empires?

Class certification is governed by Rule 23 of the Federal Rules of Civil Procedure and generally requires (1) that there to be too many potential members to identify and join each of them; (2) a common question of law or fact; (3) a commonality of claims or defenses; and (4) that the representative parties will adequately protect the interests of the entire class. It’s generally agreed that the potential plaintiffs here would meet most of these requirements. However, the focus of the discussion before the Court was whether the proposed class of female managers truly shared common legal and factual issues. One key question from Justice Kennedy has led many to speculate that Ms. Dukes and her potential class members have a fatal flaw in their argument.

During the plaintiffs' presentation, Justice Kennedy asked the rather straight-forward question: “What is the unlawful policy that Wal-Mart has adopted?” The response was that the store managers have “unchecked discretion” in the decision-making process and have used that power to create a culture of discrimination throughout the corporation. The problem with this response is that it contradicts the position that Wal-Mart’s headquarters enforces a consistent, nationwide policy, which is a key aspect of the plaintiffs' case and may be necessary to establish corporate-wide liability.

The plaintiffs' attorney tried to argue both sides of an opposing view – that there is a top-down corporate culture to discriminate against females, and that the actual decision-makers in the individual stores themselves have too much power and discretion. It was on this point where Justice Scalia accused the plaintiffs' counsel of trying to “whipsaw” the Court stating that the power given to store managers is too subjective while there is a corporate culture to guide those same managers to discriminate against women. While the commonality issue appeared to weigh in Wal-Mart's favor, how the court will decide the case is unclear at this time. A decision is expected sometime this summer, and we will be sure to provide an update when it is issued.
 

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A recent decision by the Third Circuit Court of Appeals allows employers to breathe a sigh of relief. In Noel v. Boeing Co. (pdf), the court concluded that an otherwise untimely discrimination claim, alleging that the employer discriminated against an employee by failing to promote the employee, is not rendered timely by the Ledbetter Fair Pay Act (the "Act") (pdf). The court's decision limits the reach the Act, and it is now clear that claims involving discrete acts of discrimination are not covered by the Act.

The decision involved discrimination claims under Title VII of the Civil Rights Act brought by Emmanuel Noel, an African-American employee at Boeing's Ridley Park, Pennsylvania facility. Basically, Noel claimed that Boeing failed to award him off site job assignments, which allowed for higher pay and per diem payments, and failed to promote him to a higher pay grade around September 2003. At that time, two white employees were promoted to a higher pay grade. In March 2005, Noel filed a complaint with the Equal Employment Opportunity Commission (EEOC), and eventually filed a lawsuit in June 2006. Noel's suit alleged multiple counts of race and national origin-based employment discrimination and retaliation, but the trial court held for Boeing on all counts. Noel appealed only the trial court's finding that his failure to promote claim was untimely.

Under Title VII, an employee in Pennsylvania must file a complaint with the EEOC within 300 days of the alleged discriminatory act or it will be deemed untimely. Noel's complaint was filed with the EEOC in March 2005, well beyond the 300 day filing period following the alleged discriminatory promotion decision in September 2003. For this reason, the trial court dismissed his failure to promote claim. On appeal, Noel argued that the Act saved his otherwise untimely failure to promote claim.

The Act, passed by Congress in 2009, was in response to the Supreme Court's decision in Ledbetter v. Goodyear Tire & Rubber, Co., Inc. On January 29, 2009, we posted information regarding the Act and the Court's Ledbetter decision. The Act extended the time line for filing complaints of discrimination and states that "in pay discrimination matters an unlawful employment practice occurs each time an individual is affected by application of a discriminatory compensation decision." As a practical matter, this means that each time an employee receives a pay check that contains the effects of a discriminatory pay decision, the 300 day countdown for filing a complaint of discrimination with the EEOC is restarted.

Noel argued that the Act's paycheck rule made his claim timely because each time he received his pay check he felt the effects of the 2003 failure to promote decision. The Third Circuit disagreed. The court found that in order for an untimely claim to be saved by the Act, the claim must involve pay discrimination and the plaintiff must point to some discriminatory compensation decision or practice.

The court first held that Noel did not allege a pay discrimination claim because he did not allege that he received less pay for doing equal work. The court noted that the white employees were promoted, and as a result, they were not doing the same work as Noel. The court concluded that this was not a pay discrimination claim, which alleges lower pay for equal work.

The court then went on to address whether a failure to promote claim is a discriminatory compensation decision under the Act. The court concluded that in accordance with the plain language of the Act, only decisions involving compensation are covered, and discrete employment decisions, such as promotion decisions, are not within the scope of the Act. A failure to promote claim is not a discriminatory compensation decision, and therefore Noel's untimely failure to promote claim was not saved by the Act.

The court also found support for its decision in Justice Ginsburg's blistering dissent in the Ledbetter decision, which many believe prompted Congress to pass the Act. In her dissent, Justice Ginsburg distinguished discriminatory compensation decisions, which may go undetected by employees for years, and discrete actions which are immediately felt by employees. Justice Ginsburg specifically referenced failure to promote decisions as discrete acts.

The court held that the Act was only intended to save untimely discriminatory pay decisions, and not all employment decisions. The court's rationale and decision should apply to other discrete employment actions, such as demotions and terminations. This is a good sign for employers, who under the Act may face liability for discriminatory pay decisions years or even decades after those decisions are made.
 

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President Obama signed into law the Ledbetter Fair Pay Act nullifying the U.S. Supreme Court decision in Ledbetter v. Goodyear Tire & Rubber Company. Previous posts on the content and effect of the law are as follows:

Ledbetter Fair Pay Act passed by Senate and awaiting Obama Signature

Bad News: Ledbetter Fair Pay Act and Paycheck Fairness Act Pass the House.

Record Retention Nightmare Created by Ledbetter Fair Pay Act

An employer's first concern should be the revival of claims otherwise thought extinguished under the Ledbetter decision. The law is retroactive to overrule the Supreme Court standard for assessing the timeliness of wage discrimination claims. A wage-based discrimination claim in Pennsylvania can now be filed within 300 days of the last paycheck affected by the discriminatory pay action.

An employer's next focus should be on creating a pay and evaluation system that preserves evidence supporting the nondiscriminatory basis of the decisions. The system must capture both witnesses' recollections and records associated with the decisions for all similarly situated employees.

The difficulty in defending these "old" claims lies in documenting both the decision made relative to the employee bringing the claim and the treatment of comparable employees. The legal analysis of a discrimination claim involves a comparison of the compensation paid to a member of a protected class as compared with those outside the protected class. If a compensation disparity is shown, the employer must demonstrate a legitimate nondiscriminatory reason for the difference in compensation. Once demonstrated by the employer, the employee may show that the employers reason is a pretext for discrimination. Much of this analysis will change if the Paycheck Fairness Act also becomes law.

The EEOC has a road make for its analysis of compensation discrimination claims under its Compliance Manual. The types of evidence the EEOC collects and evaluates in assessing a claim includes the following:

• Initially the EEOC determines if a wage differential exists by evaluating documents including the following:
  • Organization charts and other documents which reflect the relative position of the charging party in comparison to other employees, including written detailed job descriptions;
  • Written descriptions of the respondent's system for compensating employees -- including collective bargaining agreements; entry level wage rates or salaries; any policies or practices with regard to periodic increases, merit and other bonus compensation plans; and the respondent's reasons for its pay practices; and
  • Job evaluation studies, reports, or other analyses made by or for the employer with respect to its method of compensation and pay rates.
• If a compensation differential(s) exists, the employer should be asked to produce a non-discriminatory reason for the differential. If a an employer leaves the pay disparity unexplained, or provides an explanation that is "too vague, is internally inconsistent, or is facially not credible," the investigator should find "cause." If the employer does provide a nondiscriminatory reason, an inquiry should be made into whether it satisfactorily explains the pay differential.
• The EEOC requests information explaining the pay decisions of comparable or similarly situated employees. The EEOC may also request pay information for similarly situated employees to evaluate a disparate impact case based on a statistical analysis of compensation decisions and treatment.

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Congress has passed The Lilly Ledbetter Fair Pay Act of 2009 (H.R. 11) and The Paycheck Fairness Act (H.R. 12). Anaylsis of the new legislation to come.

The Ledbetter Fair Pay Act is discussed in a prior post on Record Retention Nightmare Created by Ledbetter Fair Pay Act .  The Paycheck Fairness Act changes the burden of proof in gender based pay claims requiring the employer to affirmatively demonstrate that any pay differential is not based on sex. Employers who cannot meet this burden face unlimited compensatory and punitive damages. The EEOC would be required to collect employer payroll information based on sex, race, and national origin thereby targeting its enforcement activities. The Bill also changed rules on class actions automatically including employees in such claims unless they specifically opt out.  PFA subjects employers to wage related class actions with unlimited damages and makes it easier for employees to prove such claims.

Ann Bares analyzes the impact of the new law from a compensation perspective in her post: Dear Legislators: A Missing Link to Paycheck Fairness?

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Ledbetter Fair Pay Act (H.R. 2831/ S. 1843) is on the fast track with full support of the Obama Administration. LFPA overturns the Supreme Court’s decision in Ledbetter v. Goodyear Tire and Rubber Co. effectively eliminating the 180 or 300-day statute of limitations for filing a wage-related discrimination claim. The Bill allows family members and others affected by discrimination to file claims and reinstitutes the Paycheck Accrual Rule for determining when a claim arises. It also allows claims based on paychecks and annuity payments which would permit retirees to bring claims.

Ms. Leddbetter's discriminatory pay claims originated from pay raises allegedly denied her based on supervisor's discriminatory evaluations of her performance conducted over a period between 1979 and 1998. The U.S. Supreme Court held that the pay setting was a discrete act triggering the180 day limitations period for filing a discrimination claim, therefore a timely discrimination claim must be based on acts of discrimination occurring within the 180 day period. Leddbetter argued that“[E]ach paycheck that offers a woman less pay than a similarly situated man because of her sex is a separate violation of Title VII with its own limitations period, regardless of whether the paycheck simply implements a prior discriminatory decision made outside the limitations period”.

The effect of the argument is to call into question decisions of supervisors made almost 20 years before the employer received notice of the alleged discrimination. Leddbetter counters that she had no way of knowing about her discriminatory treatment because of the confidentiality of the performance reviews and salary adjustments

In its Ledbetter decision, the Supreme Court enunciated a classic application of the statute of limitations governing the time period for bringing legal claims:

Statutes of limitations, which "are found and approved in all systems of enlightened jurisprudence, represent a pervasive legislative judgment that it is unjust to fail to put the adversary on notice to defend within a specified period of time, and that "the right to be free of stale claims in time comes to prevail over the right to prosecute them. These enactments are statutes of repose; and although affording plaintiffs what the legislature deems a reasonable time to present their claims, they protect defendants and the courts from having to deal with cases in which the search for truth may be seriously impaired by the loss of evidence, whether by death or disappearance of witnesses, fading memories, disappearance of documents, or otherwise. (emphasis added). 

The implication's are huge for employers in terms of faulty memories, missing witnesses, and mountains of documents. Defense of decades old discrimination claims will necessitate the retention of more documents for longer time periods. The expense associated with storage and production of documents (whether paper or electronic) may be staggering. Imagine a Request for Production of Documents or subpoena that demands access to 20 or 30 years of employer records associated with the evaluations and salary adjustments for an employee (or retiree) claiming pay discrimination. Add in all of the employee's peer comparators who were similarly situated over the same time period for a truly nightmarish perspective. Now the rationale for the statute of limitations becomes clearer.

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Reductions in Force, Layoffs, Downsizing, Rightsizing or whatever you may call it is occurring with greater frequency as the economic conditions continue to deteriorate. The business objects are reducing costs, preserving talent, treating separated employee with compassion and avoiding litigation. The compassion and litigation avoidance may go hand in glove.

The most prevalent litigation avoidance strategy is getting a release from separated employees for which a company pays severance and provides other benefits. Some companies pay severance without requiring a release and others pay enhanced severance if the employee releases claims.

I frequently get asked how much severance is appropriate. There is no right answer to this question, but depends on a myriad of factors including the size of the company, its financial condition, the number and positions of employees being released, the tenure of the employees and the risk of litigation.

Ann Bares at Compensation Force has a post that notes Global and US Severance Pay Benchmarks. There is a caveat on the international benchmark information. Severance pay is mandated by some governments outside the United States including Canada and many European countries. The amount of mandated severance varies depending sometimes on age, years of service and the reason for separation. Also missing from the analysis might be unemployment benefits received by US employees. As usual, it is not an "apples-to-apples" comparison.

Also keep in mind that releases of employment-related claims should be reviewed by legal counsel.

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As if HR didn't have enough on its plate with E-Verify compliance, new FMLA regs, and EFCA planning, next year is one of those strange years with 27 bi-weekly paydays instead of 26. Bi-weekly pay programs pay employees in 14-day increments resulting in a 364 day annual pay cycle. Since there are either 365 or 366 days in a year, every 5 years or so, there is a calendar year with 27 pay periods instead of the typical 26.

The 27 pay periods for 2009 create a compensation issue for salaried employees. Bi-weekly pay is typically calculated by dividing annual salary by 26 and employees are accustomed to a payroll amount based on this division. Continuing this practice in 2009 will result in an "extra" paycheck in 2009, but the normal 26 pay periods will resume in 2010. Some commentators have characterized this as a "timing issue". It is not. There are never years with only 25 pay periods to offset the years with 27.

Employers approach this situation in two ways. Some employers adjust salaried employee bi-weekly compensation for the 27 pay period years by dividing the stated annual salary by 27 rather than 26 resulting in a lower pay for each pay period in the year. Salaried employees are paid the same gross salary in smaller increments. However, this approach can cause problems with automatic deductions. Other employers allow the extra pay check and inflated compensation, not wanting to mess with the largely automated payroll system. Both approaches will require employee communication and may be influenced by an employer's past practice.   Legal issues can arise from reducing the bi-weekly salary amount.

Paying salaried employees on a semi-monthly basis (twice a month) avoids this problem because there are always 24 paydays. However, semi-monthly pay doesn't always work well for hourly employees because it may require estimating hours and overtime based on misalignment of the 7-day workweek with the 15 or 16-day pay period. Many employers don't want the expense of running two payrolls so they live with the 27 payday problem.

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Employers offering severance payment to employees are typically uncertain about the payroll taxes that may apply to these additional payments. Severance pay is treated as “supplemental wages” because it is not a payment for services in the current payroll period but a payment made upon or after termination of employment for an employment relationship that has terminated. As supplemental wages, special payroll tax withholding rules apply. The Internal Revenue Service recently clarified its position on withholding for supplemental wages, including severance pay.  Employers should also make sure that severance payments offered in conjuntion with a waiver and release comply with the ADEA and WARN requirments.

Revenue Ruling 2008-29 addresses nine different situations where supplemental payments are made to employees that require additional payroll tax withholding as follows:

1. commissions paid at fixed intervals with no regular wages paid to the employee;
2. commissions paid at fixed intervals in addition to regular wages paid at different intervals;
3. draws paid in connection with commissions;
4. commissions paid to the employee only when the accumulated commission credit of the employee reaches a specific numerical threshold;
5. a signing bonus paid prior to the commencement of employment;
6. severance pay paid after the termination of employment;
7. lump sum payments of accumulated annual leave;
8. annual payments of vacation and sick leave; and
9. sick pay paid at a different rate than regular pay.

For the supplemental wage payments identified above that do not exceed $1 millon, the amount of income tax withholding is determined under the rules provided in § 31.3402(g)-1(a)(6) and (7). These paragraphs describe two procedures for withholding on supplemental wages: the aggregate procedure and optional flat rate withholding. The Revenue Ruling explains the application of the two procedures to each of the nine payment types. A Supplemental to Circular E also provides guidance on withholding in Publication 15 and Publication15A.

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On September 23, 2008, the EEOC filed a lawsuit in the United States District Court for the Western District of New York against Sterling Jewelers Inc., the largest specialty retail jeweler in the United States. The EEOC's Complaint alleges that Sterling "pays its female retail sales employees less than male employees performing substantially equal work and denies female employees promotional opportunities for which they are qualified." The lawsuit seeks relief on behalf of a class of potentially thousands of current and former female employees of Sterling throughout the U.S. Sterling owns and operates the Kay Jewelers and Jared The Galleria of Jewelry stores and various regional retail jewelry establishments.

In both the Complaint and press release issued by the EEOC on September 24, 2008 to announce the lawsuit, the EEOC claims that Sterling's system for making promotion and compensation decisions is "excessively subjective" and has resulted in both disparate treatment and disparate impact sex discrimination. The "excessive subjectivity" claim is the primary allegation of unlawful discrimination in the complaint.

The use of subjective criteria in employment decisions often is unavoidable. Simply put, purely objective criteria is not always available or appropriate for hiring, compensation, promotion, and discharge decisions. "Excessive" subjectivity, however, can give rise to allegations of discriminatory treatment and systematic bias. Employers and their counsel often struggle to balance the desire to use all appropriate criteria when making employment decisions, including both objective and subjective criteria, with the knowledge that "excessive subjectivity" in the decision-making can create perceptions of bias and increase the potential for discrimination claims. 

Of course, determining what is "excessive subjectivity," as opposed to typical subjectivity common in many employment decisions, can be difficult. This problem is more significant for larger employers that lack a centralized structure for employment decision-making. An employer with more independent decision-makers has a greater chance for "excessive subjectivity," especially if the employer has not promulgated clear guidelines or requirements for the decision-making process.

The EEOC has made clear that it views "excessive subjectivity" in compensation and promotion systems as a high priority enforcement issue for the agency. The Sterling case, with its nationwide scope and focus on this issue, emphasizes the EEOC's commitment. Employers and their counsel should be aware of this issue and review their hiring, compensation, and promotion procedures to determine whether changes could produce a better structured, less subjective system.

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Employers sometimes pay bonuses to nonexempt employees without a thought of potential wage and hour compliance. Ann Bares at Compensation Force notes that Companies may pay a “lump sum” merit increase for employees who are topped out of a salary range. Other examples of lump sum payments include attendance and production bonuses, year-end bonuses and holiday gifts.  Bonuses and other lump sum payments may be included in a nonexempt employee’s regular rate depending upon the manner in which the bonus is calculated and the company’s prior communication. Inclusion in the regular rate impacts overtime calculations and payments.

Bonuses paid to nonexempt employees are included in the determination of the employees’ regular rate under section 778.208 unless the bonus falls into one of several exceptions. The bonuses are allocated to the pay period and added to other wages paid to nonexempt employees and then divided by the hours worked for the same period to determine the new regular rate under the methodology described in section 778.209. For bonuses earned over more than one workweek, the bonus must be allocated to pay periods to which the bonus applies and the regular rate recalculated. If overtime was worked during this period, the overtime rate must be revised to be time and a half the recalculated regular rate that includes the bonus payment. This is a nightmare.

Department of Labor regulations provide for several exclusions. Among these excludable bonus payments are discretionary bonuses, gifts and payments in the nature of gifts on special occasions, contributions by the employer to certain welfare plans and payments made by the employer pursuant to certain profit-sharing, thrift and savings plans. These exemptions are discussed in Section 778.211 Discretionary Bonuses, Section 778.212 Gifts and Holiday Bonuses, Section 778.213 Qualified Profit Sharing and Savings Plans, and Section  778.214 Other Qualified Plans.  Bonuses, which do not qualify for exclusion from the regular rate as one of these types, must be totaled in with other earnings to determine the regular rate on which overtime pay must be based.

Typically, any bonus announced in advance and tied to work performance, hours or other productivity will not qualify for an exemption.  There three ways to manage the recalculation problem, other than utilizing qualified plans:

1.            Percentage Total Earnings Bonus: Bonuses based on a percentage of the nonexempt employee’s total earnings under section 778.210 do not result in a recalculation of the regular rate because overtime is already been accounted for in the calculation. Under this method, the bonus is described as a percentage of the nonexempt employee’s total (W-2) earnings, thereby including both regular and overtime payments and obviating the need for recalculation of the regular rate.

2.            Discretionary Bonuses: This is an area of DOL audit scrutiny and should not be used on a regular or aggressive basis. Truly discretionary bonuses are not included in the regular rate of pay under section 778.211, if both the fact that payment is to be made and the amount of the payment are determined at the sole discretion of the employer at or near the end of the period and not pursuant to any prior contract, agreement, or promise causing the employee to expect such payments regularly. The following sets forth some of the parameters of the exclusion:

For example, any bonus which is promised to employees upon hiring or which is the result of collective bargaining would not be excluded from the regular rate under this provision of the Act. Bonuses which are announced to employees to induce them to work more steadily or more rapidly or more efficiently or to remain with the firm are regarded as part of the regular rate of pay. Attendance bonuses, individual or group production bonuses, bonuses for quality and accuracy of work, bonuses contingent upon the employee's continuing in employment until the time the payment is to be made and the like are in this category. They must be included in the regular rate of pay.

3.            Holiday Bonuses: The Holiday Gift and Bonus exemption under section 778.212 allows for the exclusion from calculation of an employees “regular rate” of pay “sums paid as gifts; payments in the nature of gifts made at Christmas time or on other special occasions, as a reward for service, the amounts of which are not measured by or dependent upon hours worked, production, or efficiency….” The following sets forth some of the parameters of the exclusion:

If the bonus paid at Christmas or on other special occasion is a gift or in the nature of a gift, it may be excluded from the regular rate under section 7(e)(1) even though it is paid with regularity so that the employees are led to expect it and even though the amounts paid to different employees or groups of employees vary with the amount of the salary or regular hourly rate of such employees or according to their length of service with the firm so long as the amounts are not measured  by or directly dependent upon hours worked, production, or efficiency. A Christmas bonus paid (not pursuant to contract) in the amount of two weeks' salary to all employees and an equal additional amount for each 5 years of service with the firm, for example, would be excludable from the regular rate under this category.

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